Because the cost of a home is typically far too expensive for consumers to pay for out of pocket, the next best option is by seeking out a loan from a mortgage provider. And while these lenders have a heavy influence on how much a borrower will spend over the life of the loan, new survey data suggests that many people may wind up spending more than they need to by buying into certain mortgage myths.
According to a new poll conducted by real estate information company Zillow, a considerable number of prospective homeowners are under the impression that they have to make a certain down payment before they can purchase a home. For example, more than one-third of respondents - 34 percent - who were in the market to purchase a residence didn't realize that they could get a mortgage by making a down payment of 5 percent on the value of the home.
This misinterpretation may spring from legislative efforts in Washington, as lawmakers have attempted to pass laws that would prevent homeowners from obtaining a government-backed mortgage if they can't make a down payment of at least 20 percent.
Borrowers unclear about where to go for most affordable loan
Something else that they often misinterpret is where they can go to find the cheapest lending rate. One in four respondents said, according to the Zillow poll, that the most reliable place to find an affordable home loan was with the bank they currently use.
In reality, real estate experts say that borrowers should shop around, inquiring with several financial services and institutions to see which one will give them the best rate.
Erin Lantz, Zillow's director of mortgages, indicated that borrowers are often too quick to take the first offer that's made, which can wind up costing them.
"If a home buyer can lower their interest rate by even half a percentage point, they can not only increase their purchasing power, but save thousands of dollars over the life of the loan," said Lantz. "Buyers should always shop multiple lenders and compare rates and fees and read lender reviews in order to find the best loan for their situation."
Half-truths may help explain why some people don't pursue a home inspection before purchasing a residence. The American Society of Home Inspectors notes that some of the most common myths that people falsely believe include the notion that inspections are only needed for existing homes, that inspectors are overly nitpicky and that the process frequently leads to renegotiated purchase offers after one has been performed.